|Al-Ahram Weekly Online
22 - 28 November 2001
|Published in Cairo by AL-AHRAM established in 1875||Current issue | Previous issue | Site map|
The tip of the iceberg?Observers have hailed President Hosni Mubarak's plan to abolish the Ministry of Economy and increase the Central Bank of Egypt's autonomy in managing monetary policy, but they hope these reforms are only the first of many. Niveen Wahish reports
Over the past 10 years the name of the Ministry of Economy has been changed three times. Each time a new minister was appointed the entity received a different name. First it was called the Ministry of Economy and International Cooperation, then it became the Ministry of Economy, and an independent ministry was established for international cooperation. The next change of name transformed it into the Ministry of Economy and Foreign Trade, the latter area of concern having previously been the purview of the Ministry of Trade and Supply. Now the government has done away with the word "economy" altogether.
The soon-to-be-defunct portfolio will become the Ministry of Foreign Trade. Its role will be to increase Egypt's exports and foreign exchange while rationalising imports. The Capital Market Authority, the Cairo and Alexandria Stock Exchange, the Import-Export Supervisory Authority and the Commercial Representation Office will be affiliated with the new ministry.
But it wasn't the name change that has generated so much interest. What has captured the attention of those in the world of business was the prime minister's accompanying announcement that the Central Bank of Egypt (CBE) will be given a freer hand in managing monetary policy.
While the decision to rename the ministry and augment the power of the CBE at first glance appeared as an attempt by the government to put an end to the disputes between the Ministry of Economy and the CBE over monetary policy, the announcement by Prime Minister Atef Ebeid has been hailed as indicating that the government is reconsidering the way it is managing the economy.
In outlining the features of the change in the ministerial economic group, Ebeid announced that the CBE will supervise the banking sector and will be answerable to the prime minister. Insurance companies will be linked to and supervised by the Ministry of Planning and the Companies Authority will be affiliated to the Investment Authority.
Ahmed Galal, executive director of the Egyptian Centre for Economic Studies is reserving judgement on whether the announced changes will be successful. The significance of these institutional changes "ultimately lies in how they will affect outcomes," he said.
Galal opined that the extent of the CBE's newly granted autonomy has been exaggerated. "There is no such thing as absolute independence," he said. The CBE, said the think tank director, should have free rein to use its powers to achieve the general objectives set by the government, meaning that the bank does not determine banking and monetary policy; it only decides upon how to implement it.
While acknowledging the importance of greater CBE autonomy, Galal cautioned that the government must clearly state to whom the CBE governor is accountable. He suggested that like the US, where Governor of the Federal Reserve Alan Greenspan reports to congress, the CBE governor should be accountable to parliament.
Galal characterised the pronounced shake-up as comprising only a partial institutional change in the way the government is managing the economy. Pointing out that Egypt has over 30 ministries, he said "There is a need for a fresh look at the way the government is organised."
A reduction in the number of ministries, said Galal, could help achieve the goal of institutional reform: improved policy coordination and predictability of the decision- making process.
Sherif Delawar, businessman and economic expert, took a similar view, saying that improving the coherency of Egypt's economic policy is key to enabling the country to face the challenges resulting from the events of 11 September. Delawar is hopeful that the announced changes signal that the government is beginning to reconsider the ministerial structure. He suggested that the Ministry of Industry be merged with the new foreign trade ministry. That action, he said, would enhance the ministry's effectiveness in coordinating among industries to ensure that local products are available to replace imports and to encourage the establishment of export-oriented industries.
Delawar also suggested appointing a deputy prime minister for economic affairs to coordinate among the ministries concerned with the economy.
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